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Settlement Funding, LLC v. Brenston

Court of Appeals of Illinois, Fourth District

August 26, 2013

SETTLEMENT FUNDING, LLC, Petitioner/Transferee-Appellee,
v.
CATHY BRENSTON, Respondent/Transferor-Appellant.

Appeal from the Circuit Court of Sangamon County. No. 07-CH-451 & No. 08-CH-329, Honorable John P. Schmidt, Judge, presiding.

Justices Stewart and Wexstten concurred in the judgment and opinion.

OPINION

CATES, JUSTICE

¶ 1 The respondent-transferor, Cathy Brenston, filed petitions to vacate void orders which approved the transfer of her structured settlement payment rights to the petitioner-transferee, Settlement Funding, LLC. The circuit court of Sangamon County found that Brenston's petitions, filed more than two years after the entry of the transfer orders, were time-barred. On appeal, Brenston contends that the court erred in dismissing the petitions where the pleadings sufficiently showed that the orders approving the transfers were obtained by fraud, and therefore void and subject to challenge at any time. Brenston also contends that the court erred in denying her motions to reconsider and motions for leave to file amended petitions to assert a legal disability of incompetence. We reverse and remand with directions.

¶ 2 I. FACTS AND PROCEDURAL HISTORY

¶ 3 This case involves three appeals (4-12-0869, 4-12-0870, 4-12-0944) that originated in the Fourth District Appellate Court. The cases were consolidated under 4-12-0869 for purposes of hearing and decision. At the request of the Fourth District, the Illinois Supreme Court issued an order assigning the consolidated appeals to this court. The appeals challenge the validity of the trial court's orders granting two petitions filed by Settlement Funding, pursuant to the Structured Settlement Protection Act (Act) (215 ILCS 153/1 to 35 (West 2008)), seeking court approval for the transfer of certain structured settlement payment rights due Brenston. The structured payments were part of a negotiated settlement of a medical negligence action that Brenston filed in 1999. We begin there and set forth the facts and procedural history that are pertinent to the disposition of this appeal.

¶ 4 A. The Underlying Medical Negligence Action

¶ 5 In 1999, Cathy Brenston filed a medical negligence action in the circuit court of Cook County, against defendants, University of Illinois Chicago Hospital and University of Illinois at Chicago Women's Care Center. Brenston alleged that she suffered severe injuries as a result of negligent medical treatment she received at the University of Illinois Chicago Hospital and the University of Illinois at Chicago Women's Care Center during the period from August 1998 through November 1998.

¶ 6 In January 2003, Brenston settled the case with the University of Illinois Board of Trustees (University Board). The settlement included a lump-sum payment of $864, 228 and structured periodic payments. According to the payment schedule, Brenston would receive $5, 000 per month, guaranteed for 120 months, beginning March 1, 2003, and ending on February 1, 2013, with payments increasing 3% annually, and thereafter, a monthly payment of $6, 719.58, guaranteed for 60 months, beginning March 1, 2013, and running for the longer of her life or through February 1, 2018, with payments increasing 3% annually. The settlement documents include the written settlement agreement, uniform qualified assignment release and pledge agreements, and annuity contracts.

¶ 7 1. The Written Settlement Agreement

¶ 8 The written settlement agreement contains an antiassignment provision which states: "Claimant acknowledges that the Periodic Payments described in Section 2.0 cannot be accelerated, deferred, increased or decreased by the Claimant; nor shall Claimant have the power to sell, mortgage, encumber, or anticipate the Periodic Payments, or any part thereof, by assignment or otherwise." The written settlement agreement also includes a provision in which the claimant acknowledges that the University Board will make qualified assignments of its liability to make periodic payments to Allstate Settlement Corporation and to GE Capital Assignment Corporation, within the meaning of section 130(c) of the Internal Revenue Code of 1986, as amended, and that the claimant will accept the assignments without a right of rejection.

¶ 9 2. The Uniform Qualified Assignments and Annuity Contracts

¶ 10 The University Board executed two uniform qualified assignment release and pledge agreements within the meaning of and subject to the conditions in section 130(c) of the Internal Revenue Code of 1986. One qualified assignment is with Allstate Assignment Company (the Allstate Assignment) and the other is with GE Capital Assignment Corporation (the GE Assignment). In each agreement, the University Board is the assignor and Brenston is the secured party.

¶ 11 In the Allstate Assignment, Allstate Assignment Company, the assignee-debtor, and Allstate Life Insurance Company, the annuity issuer, agreed to accept a qualified assignment of the University Board's obligation to make monthly payments to Brenston in the sum of $5, 000, for the period from March 1, 2003, through February 1, 2013. The Allstate Assignment states that all rights of ownership in and control of the annuity remain vested in the assignee-debtor and that Brenston, as the secured party, has no rights of ownership or control over the annuity. The face page of the Allstate annuity contract contains a stamped notice which states:

"This annuity contract has been delivered to the possession of Cathy Brenston for the sole purpose of perfecting a lien and security interest of such person. Cathy Brenston is not the owner of, and has no ownership right in this contract and may not anticipate, sell, assign, pledge, ...

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